Opportunities in Real Estate for 2023
It has been a wild year for the real estate and financial markets, but this is also creating some interesting opportunities. And before I get into those opportunities, I just want to say that I believe that the first quarter of 2023 is gonna produce some amazing deals, and that’s why I wanted to make this video.
Now, it’s not going to be every property on the market, and you do have to do some digging, which I’m going to get into here shortly, but there’s going to be some great deals to take advantage of for different types of buyers.
And honestly, what caused me to dig deeper into this was the fact that Wall Street and super wealthy investors are gearing up to take advantage of certain things in the market. And the general public has no clue that this is happening or… they’ve been scared away from the market.
Personally, my family and I own our primary home plus a couple of rental properties, and we're looking to add one to two properties right now. We’ve been looking at multiple other out of state opportunities for the first quarter.
And I’ll tell you this, I’ve worked my ass off at jobs for the past 20 years, but nothing has made me more money than real estate. Owning the properties, which is obviously slow appreciation over time, but then things like paying down the balances, amortization…. that puts equity in your pocket each and every year.
And on the rentals, the fact that I’m getting positive cash flow each and every month, that’s passive income, which is the best type of income. I don’t know about you, but I love making money while I sleep, and that has been a great source of wealth and future income, this is my retirement plan.
And, some say that it's a pain in the ass to have rental properties, but here’s what you can do, you can get a property manager to handle this for you, and also a lot of the problems that people talk about are waaay exaggerated. So, it just comes back to real estate being a great source of wealth for myself and so many other people that I work with. Owning real estate completely changes people’s financial future, and I just wanted to stress the importance of this before we get into it because so many people overlook this…
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So the game plan for this video, I'm gonna go over some data points really quick. Then, we’re gonna get into, how do I identify deals in today’s market? How do we structure those deals to really take advantage of them?
And then, how do we structure the financing?
Right now everybody knows interest rates are higher, but there’s ways you can bring the financing down using this game changing strategy….using the seller’s money. We'll get more into this… then what the outlook is for the financing in the future…
Okay, for some of you, today’s video might just be some really good information that you wouldn’t have heard anywhere else…. Some may be looking to buy your first home and you want to know how to take advantage of the market.
Some of you already own a home and you might be thinking of upgrading that to your dream house, or you might be thinking of buying your first investment property. No matter where you're at, this is gonna be really important information for you or someone you know.
Also, at any point during this video, if you just want to skip ahead and book a call with me, you can go ahead and do that at the link in the description, Ill be more than happy to go over your specific scenario. Book a call: https://calendly.com/alexrehlusa/15min
But, I just want to give you all the data and I’m gonna show you some great opportunities that will be coming up in the first quarter. Now here’s the thing, real estate is up massively over the last couple years.
So, it’s perfectly normal to see a little bit of a pullback because nothing should go up in a straight line…
Although we're already seeing a pullback, it’s actually healthy for the market. Whenever there is a pullback, you’ll see a lot of people jumping on this news of the market’s going to crash,..JUST because it makes great news and scares your average consumer….Youre watching this, so I know youre not average…
Now, this current market is nothing like the market was in 2008. I'll make another video on the specific data for the current market and explain why it’s nothing like it was in ’08…
I'll make sure to update the description and add the link in there for you at a later time or it may already be there now. It will help you understand and determine that this is a healthy pullback….
What we really want to do is use this short-term event, which is a normal pullback, and see if you can find deals.
Okay, so I think it’s important that you know that most of the people who are interested in buying a home or need to buy a home, didn’t just go away. They just hit their pause button for a bit due to the uncertainty of the market. So those buyers are still there…
I mean, don't get me wrong. I know there are people who lost their job or maybe something major happened financially, but for the most part, these buyers are just sidelined. Theses last couple of years have been pretty wild, to say the least.
Currently, unemployment is really low, and there’s a lot of opportunity out there for people to make money. So, this isn’t your normal, typical recession where you see a lot of joblessness, a lot of pain and suffering…. A simple search and you'll see there are a ton jobs available…. and with ride share and food delivery services, anyone can sign up and start earning some extra money the same day.
Basically what’s happened with home buyers,…there use to be a lot of FOMO, fear of missing out, and not it's changed to FOMM, F-O-M-M, fear of making a mistake. A lot of this type of thinking comes from the 2008 recession OR just not having enough data.
No one wants to make a major mistake with their finances, so they’re just sitting on the sidelines waiting to see how things play out.
Okay so this sentiment will change and…. I’ll go over a few factors that are gonna cause this.
So, next… I’m gonna show you a few key data points about the market because it’s gonna give us clues as to where the market’s headed, and then… also I’m gonna get into the opportunities and that’s what’s gonna be really important about this,…So stick around.
Now as I said earlier, there are major institutional funds that are gearing up to buy more real estate in 2023. Blackstone just raised a massive fund for acquiring real estate in 2023, and that’s gonna include single family homes in many markets around the US.
And, then JP Morgan Chase just announced a $1 billion dollar specific fund for acquiring single family homes. Why are they buying?
It's because they know that demand is pulled back, so they’re gonna use this to get better pricing on properties, but the main thing they’re looking at is supply.
They know that there is a shortage of housing…..There’s a shortage of single family homes in many of the growth markets throughout this country. After the 2008 recession many builders slowed down and just did not build enough homes over the past decade. So the US is short for the demand of all the households being formed.
So, if you zoom out and look at the big picture over the next several years, there’s just going to be a continued shortage of single family homes in several markets.
And Demand will go up and down a bit based on the economy, but the main thing is there’s not gonna be a huge amount of supply coming on the market, which is good for housing prices… over the long term.
So, let’s look at interest rates, which are the biggest driver of demand. You saw interest rates spike this year, which caused people to get a bit fearful and pull back on demand, but now you're seeing rates cool off a bit.
Now, mortgage rates move with inflation. They don’t move with the short term rate that the Fed moves up and down, they move with inflation. So as inflation got out of control, so did mortgage rates, but now in the last couple months, you’ve seen inflation cool off just a little bit and at the same time, mortgage rates have started to cool off just a bit.
But Rates are still elevated, they’re still a lot higher than they were in 2020 & 2021, but they’re getting more reasonable.
Now, interest rates are something that we definitely need to keep an eye on because this is the -single biggest factor that’s driving the market today.
There’s also a big factor here that’s very important to note. There is a significant group of homeowners who have a 30 year fixed mortgage rate below 4%, some people even below 3%.
These people locked in ridiculously low interest rates for the life of the loan, and THEY ARE in no rush to give up that rate. Meaning there’s a lot of stability in the homeowners who have these super low rates, we've never seen that before. That’s a new factor thats specific to this market today.
This is important because this is just another factor that’s going to keep the inventory numbers low.
Now we’re gonna look at some opportunities and the purpose of looking at all that data first was to show you that
YEA, there’s gonna be some great deals out there, but at the same time we have to be realistic because there’s also some stability in the market, and it’s not gonna be some crazy crash like it was back in ’08. The market is completely different this time around.
So here’s the deal, Wall Street, super rich investors, they’re all going to look to acquire quality assets at a discount, they will be holding these assets long term. That’s how they get even richer. This is what happens every time that there’s a pullback in asset prices. It seems like almost a transfer of wealth from the middle class, but it doesn’t have to be that way.
We can participate in that too. So, here’s how we find deals in the current market. The most common way to get a good deal is to find a motivated seller. This is a seller who maybe had a life event where they need to sell. They may be in a financial hardship or there could be some other factor that’s driving them to sell within a certain timeframe.
This isn't taking advantage them at all, you're helping them get out of their situation, this is how deals are found.
Now, we want to look for motivated sellers in conjunction within aged listings. These are properties that were listed too high or for several other reasons… but they’ve been in the market for too long. This causes the listing agent and the seller to be more willing to play ball with negotiating.
Now, another motivated seller is going to be an institutional seller or a builder. Right now on the institutional side, there are companies that acquired a bunch of properties that now need to flip them, or there could be an individual small company.
One company the comes to mind on the institutional side is Opendoor. Opendoor bought a bunch of properties over the last year and they still own a significant number of homes in the country today. I've recently had few customers purchase OpenDoor properties at major discounts, We're talking $50-100k discount. https://youtu.be/T0afMVtANVA?t=492
So if I look at just an example in my market, Opendoor owns a decent number of properties in my market. https://youtu.be/T0afMVtANVA?t=513
There’s a lot of properties that they still own, and these are great deals because they are willing to negotiate. In many cases on these properties, they listed them way too high and now they’re willing to negotiate on price.
Let me show you, this Single family home in Simi Valley, CA. https://youtu.be/T0afMVtANVA?t=526
This property is actually pretty nice on the inside & the front yard, the backyard does need some work, but it looks like a good quality home, and this thing was listed way too high. It’s been sitting on the market and they've cut the price by $80,000 dollars.
They’re definitely willing to negotiate on this specific property. I think you can get this one at a great price and also structure a great deal.
Now, there’s so many more just like this, and there’s also more properties that are owned by Opendoor in many markets.
Some of them have been remodeled, there’s some great opportunities for upgrading your properties or even looking at properties that are just going to make great rentals.
Now on the builders side, there are some builders who are motivated to sell existing inventory of homes, so they’re willing to cut really good deals on it.
That’s another area that we can look at for motivated seller opportunities.
A transaction I recently did the loan on, the real estate agent was able to negotiate a lower price for the buyers. In most cases the builder sets the price and there is no negotiating…. The buyers ended up getting a killer deal!
Now on the high end, I’m seeing some really significant discounts because these properties are usually listed way too high by listing agents. They sit on the market much longer… I’m seeing properties at the high end that are getting a half a million-dollar+ discount from where they are currently listed. So, you will see some bigger moves percentage wise on the high end properties on a case by case basis.
Okay, how do you find the deals in the market? Well, there’s software available that can be used to narrow this process down and identify the good deals in any market.
You can also schedule a time to speak with my team and I , we can go over exactly what youre looking for, and if you want to schedule a time with me, the link is the description. Book a call: https://calendly.com/alexrehlusa/15min
Okay, so locating the property you want does take some time so I would have to connect you with a few real estate agents, but my team and I are happy to go through this with you on a one-on-one basis for anybody who is interested in digging deeper into specific criteria for your market.
Now, when we do find one of these deals, how do we determine how much to offer? What’s the biggest discount we can get? And, then how do we structure the deal?
Now every deal is going to be a little bit different, so we’re going to need to do some analysis on each specific deal to find out what’s the sweet spot for where we should make an offer on this property.
We want to make an offer at a discount to what the current market value is, because that’s a good deal. It also gives you a cushion in case prices pull back a little bit more. It’s important to know that most experts are showing that over the next year or two, prices aren’t expected to pull back more than 10% and in super aggressive markets, they’ve already pulled back 10% and maybe are due for another five to 10%.
So, every market’s different, every deal is different, and that’s where we need to dig deeper.
But here’s something that’s important on every deal, when you’re making an offer on the property, you want to ask for credits from the seller.
So instead of taking the full amount of the discount in the price of the property, what we do is we ask for some discount, but then we also build in credit. Credits can be used to pay your closing costs. They can also be used to buy down your interest rate so that your monthly payment will be lower.
If you go back to when I was talking about interest rates, interest rates are a bit elevated currently, but when they pull back, you can refinance this debt.
So, what we really need is a great opportunity to get through the next couple years, so that our payments aren’t too high.
One way to do that is called a temporary buy down, where the seller pays for your interest rate and monthly payment to be lower for the first one, two, or three years of the loan. This is built into the deal and it keeps your monthly payment low for the first couple years of the loan. This is important because most experts agree that in the next two years you’ll have an opportunity to refinance the debt at a lower rate.
So, this gets you through that period with a reasonable monthly payment. You could also use the credit from the seller to just buy down the note rate permanently, but you don’t get as much bang for your buck.
So, one of the things we do when you’re going to make an offer on a property, is determine should we do a temporary buydown or should we do a permanent buydown? How long are we going to keep this loan and when are we going to be able to potentially refinance this loan?
These are all factors that play into how we structure the deal from an interest rate perspective. Now, everybody’s situation’s going to be a little bit different, so we have to tailor this analysis to the individual and how well qualified they are, all these other factors that go into it.
Another thing you can use the credits for is to make repairs or improvements to the property.
For example, if you need to replace the carpet or if you need to replace the floor or new paint, sometimes the roof may need some repairs, these are things that can be built into the deal because of the current market situation.
-Now when the market flips more to a seller’s market, you don’t really have the opportunity to build these things into the deal, kinda what happened in 2021, but right now you can definitely do this on most transactions.
Now if you have questions on any of the stuff I’m covering in this video or you want to look at possibly taking advantage of the market in the first quarter, we’ve set aside time to do one-on-one consultations where we can go deep into your specific scenario, look at deals in your market, in the price points you’re interested in.. and actually run the numbers
Is this a good rental property? Is this a good property for you as a primary home? How much would the payments be? How much would you be able to afford? All those things have to be done on a case by case basis.
I'm happy to do that for a select number of people. We do spend a lot of time with each individual client, so we set aside a certain amount of time to provide each client with a good gameplan. Book a call: https://calendly.com/alexrehlusa/15min
If you want to grab one of those spots, there’s a link below where you can book a one-on-one strategy call with me, and I'll be happy to go through that with you.
Again, I know for sure there will be amazing deals in the first quarter. I’m taking advantage of this personally. I know many people are doing the same, and I'm happy to go through the numbers with you if it’s something you’re interested in exploring more.
So, I hope you found this video helpful. Please let me know if you have any questions, and until then, Please subscribe to stay up to date on my next videos….
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Book a call: https://calendly.com/alexrehlusa/15min